PFI, failing hospitals and the question of who else was going to pay for the new hospitals that we need.
Yesterday was the fifth anniversary of Tony Blair’s departure from Number 10 and last night I had a small party at my place for some of us who worked for him, so it’s perhaps fitting that today’s post defends one of his health policies.
On Tuesday as South London Hospitals NHS trust was moving towards administration a number of radio journalists asked me to go on the media and talk about it. Unfortunately I didn’t have time on Tuesday but in conversations with the BBC it was clear that the Government was blaming the PFI at the hospital for the financial problems.
There are three very different arguments I would have made.
The first concerned the size of the building programme that was needed in 1997 and the necessity to find the money to pay for it. At that time more than half of the buildings that NHS hospitals inhabited were older than it was. The NHS needed a massive injection of capital and it was right to obtain it from the private sector.
I can understand those on the left – who will never have any prospect of being in Government – being against private sector finance. (Although only the wealthiest members of the far left that I know – and you know who you are – used money from their parents to buy their own houses. The rest of them, and the rest of us, had to borrow money from finance capital to pay for the mortgages to buy the houses we live in).
We are used to borrowing money on a mortgage to buy our homes – so what makes that so odd for building hospitals? For 33 years I paid a mortgage for the homes that I lived in. Over that period the cost of the money I borrowed added up to many times more than the cost of the houses. It’s a normal part of most of our lives ).
But it’s a bit rich (a phrase that resonates so well) for the Cabinet to say that they would have raised the money from the public sector. In 2002 the Conservatives voted against the 1p on National Insurance that was raised in order to increase resources for the NHS. They disagreed with raising the money that the Labour Government invested in the NHS through taxation. I can’t see where they would have got the extra billions from the tax payer to pay for the new hospitals.
They could have course have raised the money by increasing public debt, but I seem to remember them saying – every day for the last three years – that the country was in an economic mess because the Labour Government had raised public debt by too much as it was. Adding a few tens of billions to that would have been going against their own policy.
Given that I cannot see how the Conservatives would have raised the money; I don’t see how they could have built the new hospitals. If they had been in charge between 1997 and 2010 the NHS would have reached its 65th year with more than half its hospital buildings being 65 years old or more.
The second argument is about the affordability of PFI. There is something very odd about hospitals with PFI buildings complaining that they are too expensive. Nearly every PFI application that I saw had had its original request for money considerably reduced. PFI applicants – the hospital trust boards – were clamouring to have much larger debts to pay and all – in their applications – signing off on their ability to pay for them. They complained loudly that the Labour Government would not allow them to get into much more debt than they did. The debt with which they ended up was, so far as they were concerned, affordable when they were applying for the money
Many hospitals have thrived with their PFIs. They recognised that new buildings need to be paid for but have also recognised that they are an asset which will bring in revenue. They have ‘worked the asset’ rather than simply sat back and admired it. When this happens new buildings for hospitals develop value – not just cost.
Of course there are some hospitals that would have liked a new building and not having had to pay for it. But this is the economics of make believe. Someone has to pay for the building and it is clearly right that the hospitals that get the value from the building should pay for them.
The third PFI argument is more directly political. The current Government now seem to be saying it was a bad idea and that we should not have done it. It will take at most a day’s research to find a considerable number of current Cabinet members arguing publicly and passionately for the PFI money to be granted to their local hospital – and celebrating with the local hospital when the PFI credits were granted.
At the time they were passionately in favour of PFI. Now they are not.
But they are also a Government saying that its predecessor borrowed too much and now has to pay it back.
So it’s ‘real economics’ for the country as a whole but fairy tale economics for the NHS,